Australia

Contentious class action fees pass in Victoria

A contentious law that changes the way lawyers are paid for class actions has passed the Victorian parliament.

The reform will allow lawyers to charge contingency fees for class actions, meaning they can take a slice of settlements, rather than a fee for their work.

Normally a dry area of debate reserved for the legal and business sector, the reform has opened a political battleground at both state and federal level.

The passing of contingency fee laws in the upper house on Thursday night means Victoria will be the only state or territory with the scheme.

Supporters of the fee arrangement say the move will allow more people to launch class actions. At the moment, unless a law practice is willing to act on a "no-win, no-fee" basis or is backed by a litigation funder, a plaintiff risks being personally liable for paying the defendant's costs.

Labor MP Sonja Terpstra said judges would decide what percentage lawyers took of the settlement in a safeguard that would ensure more money was returned to plaintiffs.

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Contingency fees have been backed by the Productivity Commission, the Victorian Law Reform Commission and Australian Law Reform Commission.

But critics say the scheme is a windfall for plaintiff lawyers who stand to make even more, while leaving them hopelessly conflicted and lead to an increase in unmeritorious claims.

The Liberal Party called the move a "handshake" to Labor-donor plaintiff firms, or as MP Bernie Finn said in parliament on Thursday, justice for "rich lefty lawyers."

Labor MPs said the Liberals were in lockstep for big business who wanted to stem the flow of class actions and dodge corporate misfeasance.

"If corporations do the right thing by people, then corporations have nothing to fear," Ms Terpstra said.

It comes as the federal government launched an inquiry into the regulation of the funding of class actions.

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